Published September 18, 2008

'All Weather' boost, Minibond dampener

Investors in Merrill notes to get refund, but Minibond saga likely to drag on

By SIOW LI SEN
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(SINGAPORE) First, the good news: investors who subscribed to the All Weather Booster Notes arranged by Merrill Lynch and wish to pull out now can do so - and get a refund.

On the other hand, those who invested in the Minibond notes arranged by now-bankrupt Lehman Brothers are in for a long wait to know what's in store as the unwinding process has yet to begin.

Both sets of investors had started to sweat after Lehman went bankrupt and Merrill Lynch was bought by Bank of America (BoA). Fortunately for those who invested in the All Weather Booster Notes, although the sale had closed, the notes had not been issued yet. They are due to be issued on Sept 20 and the money collected from investors is being held by the distributors till then.

'We understand that distributors have received advice from Merrill Lynch that investors who have subscribed to the Citrine All Weather Booster Notes will have the option of getting a refund if they do not want to go ahead with the purchase now that Bank of America has bought over Merrill Lynch,' said Koh Ching Ching, OCBC Bank spokeswoman.

OCBC is among nine distributors here who sold the Citrine Notes. The rest are ABN Amro Bank, AmFraser Securities, CIMB GK, Citibank, DBS Vickers, DMG & Partners, Standard Chartered Bank and UOB Kay Hian.



Meanwhile, HSBC Trustee, which looks after the Minibond investors, said it is engaging legal counsel to explore all options.

Investors who bought Minibond notes worth almost $500 million arranged by the bankrupt Lehman Brothers have been calling and visiting their brokers and bankers trying to get some answers.

A spokesman for HSBC Institutional Trust Services yesterday said: 'In our capacity as trustee, we are focused on safeguarding the interests of the investors and are engaging legal counsel to explore all options available.'

Allen & Gledhill are the legal advisers to the Minibond notes, which were sold over the last two years to mainly small investors as the minimum amount was $5,000.

Morose Minibond investors have been trying to get some answers from their brokers and bankers on what's going to happen to their investments.

But there are no answers although there is a long line of parties who will first be paid before Minibond noteholders get anything.

In the event of default, which requires the underlying assets to be sold, 'the net proceeds could be insufficient to pay all the amounts due to noteholders', said Minibond in a filing document.

It also said that the swap counterparty (Lehman), the trustee and the custodian (both HSBC) shall rank prior to the noteholders when it comes to what money may be recovered.